Saturday, 29 June 2013

Vijayawada-based civil society organisation Corporate Frauds Watch served a legal notice to the Union Minister for Corporate Affairs, Sachin Pilot for openly supporting multilevel marketing companies in general and Amway India Enterprises in particular which is against the spirit of the Constitution and the judgments of various high courts in the country.

The Vijayawada-based civil society organistion Corporate Frauds Watch has been striving to bring awareness among people regarding the dubious activities of several companies which have been indulging in money circulations schemes in the name of selling products and services.

Shaik Mastan Vali, counsel for the Corporate Frauds Watch issued the notice to the young Central Cabinet Minister.

Corporate Frauds Watch pointed out that after the arrest of the C.E.O. of Amway India Enterprises by Kerala Police, the Union Minister has made a statement that the Ministry is trying to safeguard the interests of such companies by an enactment. This statement created havoc in the minds of victims and confusion in the minds of general public. Hence, Corporate Frauds Watch wants to put the following information to the knowledge of the Minister.

Amway got F.I.P.B. permission by misrepresentation and misleading statement of promotion of direct selling. But in reality what is happening at the ground level is Amway has not engaged in direct selling to the end-consumers. Amway has been selling products to its members for Rs.96/- and in turn these members are selling the same product to the end-consumers for Rs.100/- with some retail profit apart from commissions on enrollment of new members. Thus there is no direct sale by Amway. Moreover Amway will not sell products directly to the end-consumer. If the Minister has any doubts in this regard, he may try to purchase products from the Amway office and learnt the same.

Amway has been running 6-4-3 scheme in the guise of sale of products. The 6-4-3 scheme means the first person has to sponsor/enroll 6 persons and these six persons have to enroll /sponsor 4 persons each totaling 24 persons and again these 24 persons have to enroll/sponsor 3 persons each totaling 72 persons. Thus there are 103 persons (1+6+24+72) in 6-4-3 scheme. These 103 persons are called one leg for commission distribution.

In the year 2002 itself, RBI, after examining the scheme of Amway, filed a criminal case against Amway in Sector 26 P.S. in the Union Territory of Chandigarh.

In 2002, Minister for Finance and Company Affairs Adusul V. Anand informed the Lok Sabha that the scheme of Amway is creating chain of distributors and falls under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978.

The Division Bench of the High Court of A.P. after hearing at length and verifying the scheme and ground-level report has held vide WP 20470/2006 that the scheme of Amway is nothing but illegal Money Circulation Scheme banned under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The Supreme Court of India also upheld the judgment of the AP High Court order when Amway filed an SLP bearing No.13414/207 against the order of the Hon’ble High Court of AP.

In Kerala also, Amway, by lobbying, made the Kerala Government to make guidelines to save itself from the provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and further violated even the State government guidelines.

It is respectfully put to the knowledge of the Minister that Multi-Level Marketing is nothing but product camouflaged illegal money circulation scheme because in the front end these so-called MLM companies show case sale of products and in the back end they promote illegal money circulation scheme. They promise huge commissions not only on the event of personal efforts of joining new members but also on the contingency relative or applicable to enrollment of new members by their downline members. We request the Minister to kindly just remove the product from the schemes of these persons, and then the naked money circulation scheme will be exposed.

It is further respectfully put to the knowledge of the Minister that the recent statements of the Hon’ble Minister supporting the MLM companies have created confusion among the public and havoc in the minds of victims. As per Section.3 of The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 it is not permissible and punishable.

Hence, the Minister is requested on behalf of the Corporate Frauds Watch not to make such statements encouraging the MLM companies in the interest of general public and society.

Friday, 28 June 2013

NMart filed a writ petition in Andhra Pradesh High Court seeking transfer of all criminal cases filed against the company to the Crime Investigation Department (CID), Hyderabad. The High Court admitted the petition and issued notices to the State Government and the Director General of Police to present their views on the petition.Though it has to be wait and watch what the government would do in this respect, some basic questions arise regarding the writ petition.Can a theif ask or demand that a particular police officer or a group of police officers should investigate his crime?This is not first time such proposal was put forward by NMart. Earlier also, the same demand was proposed and that writ petition was wtihdrawn later.WHY NMart is asking the judiciary to transfer the criminal to the CID is the moot point to be discussed at length. However, due to the constraints of many things, let us briefly discuss about the issue here.The CID has the dubious distinction of prolonging the investigation for several years. Moreover, the CID never presses for the expedition of the trial in the court.The cases in point are several instances. The CID filed a criminal case against the Amway India Enterprises in 2006. The Amway India moved the AP High Court to declare its business model legal. However, the High Court in unambiguous terms stated that the business model of Amway is illegal. Then Amway India tried its hand by moving a special leave petition in the Supreme Court. Unfortunately for Amway, the Supreme Court upheld the High Court decision.Then following direction of the Supreme Court to complete the investigation in six months and file the chargesheet, the CID filed the chargesheet in the Chief Metropolitan Magistrate Court, Nampally, Hyderabad in 2007. For reasons better known to the CID officials at the helm of affairs, the name of the company i.e.Amway India was not mentioned in the chargesheet. When that was pointed out by a section of media and Corporate Frauds Watch, the CID officials included the name of the company in the chargesheet. After that the CID never bothered to pursue the case in the CMM Court. The accused in the criminal case including the CMD of Amway India 'visit' the court occasionally whenever it was suited to them and ask for a date for the next appearance whenever suited to the accused.Now it is more than six years, the 'farce' has been going on without taking the case to its logical end.Then again in 2008, Corporate Frauds Watch filed a criminal case against GoldQuest International, which has duped Indian up to over 20 billion rupees. When several criminal cases were filed against the fraudulent company all over the State, the investigation was transferred to the CID in 2008. Even after five years, the CID did not file even the chargesheet in the court. It is not even sure whether it had completed the investigation into the whole murky deals of the GoldQuest.The CID has also taken up investigation into the Rs. 30 billion fraud by speakasiaonline. The Singapore-based company had defrauded Indians and after Corporate Frauds Watch lodged a complaint, the CID has taken up investigation in 2011. The investigation remains incomplete till date forget about chargesheet.Morever, there have been several allegations against the top CID officials regarding the investigation into these criminal cases. In essence, transfering the case to CID means burying it fathoms deep. That is why the crooks of NMart has moved the High Court to transfer the case to the CID. The reasons:1. The accused would obtain the bail easily since there would be little resistance.2. The case would be pending investigation for many years3. After investigation the case would be pending trial for many years.4.The accused would enjoy the 'fruits' of his crime without hindrance.5. The accused would have to appear, if at all, before only one court instead of various courts throughout the State.6. The accused would be able to start another racket before the law-enforcing agencies caught him.7. The conviction, if at all, for the crime would not be in near future. When there are so many benefits, naturally, the thief asks for investigation into his crime by an officer of his choice.P.S. After making many trips to various parts of Andhra Pradesh, Gopal Mohan Singh Shekhawat is now cooling his heels in the Ongole district jail comfortably with the luxuries his ill-gotten money provides him.

Monday, 24 June 2013

The American-educated, pretty-boy, politician, Sachin Pilot, is currently on an official tour of the USA where he's been playing the unconvincing role ofIndia's intellectually, and morally, authoritative Minister for Corporate Affairs.

I don't what it is about Sachin Pilot, but he's now beginning to remind me of Tom Cruise.

'The Economic Times of India' has recently published the following report of young Sachin's latest, absurd, but nonetheless dangerous, pronouncements on the subject of 'MLM Income Opportunity'racketeering:

With an aim to segregate the genuine multi level marketing companies from those operating fraudulent ponzi schemes, the (Indian) corporate affairs and consumer affairs ministries are working on a clearer set of rules for such businesses.

"While we must take strong action against the companies that are misusing the laws and duping investors, reputed companies that are doing good work and did not violate any Indian laws should be allowed to operate without any fear. They must be given confidence," Corporate Affairs Minister Sachin Pilot told PTI in an interview here.

The Indian minister is on an official visit here. The minister's comments come against the backdrop of the recent arrest of global direct selling major Amway's India Chairman William S. Pinckney and two company directors by the Kerala Police over allegations of fraud.

While they were released later on bail, the incident has generated a debate on need for a clear set of rules for differentiating between registered companies doing genuine businesses and those duping the investors through fraudulent schemes structured like multi-level marketing operations.

"My Ministry (Corporate Affairs) and Ministry of Corporate Affairs are now working on clarifying these guidelines (for multi-level companies)," Pilot said.

Stressing on the need for protecting investors against fraudulent entities, the Minister said the newspapers also have a larger role to play as watchdogs and should not entertain paid advertisements from illegal companies.

Sachin Pilot is evidently still mistaking the 'MLM' Utopianfairy story for fact, and, as I have previously pointed out, if this well-connected young fellow sincerely believes 'Amway India Enterprises' to be 'doing good work,' then he is not fit to be making the tea at the Indian Corporate Affairs Ministry, let alone running it. There are, of course various other, possible, logical explanations for Sachin Pilot's morally, and intellectually, feeble stance - most of which (if rigorously investigated) would land him in prison.

The mere fact that the Indian Minister for Corporate Affairs has been passing any comments on this dissimulated form of ongoing, major, organized crime (as though it is a lawful commercial enterprise),is a victory in itself for'MLM Income Opportunity' racketeers.

Despite what Sachin Pilot claims to be reality, the republic of India already has common-sense criminal legislation which seeks to protect the Indian public and punish the guilty, by identifying, and banning, all forms of closed-market swindles, or pyramid scams, no matter how cleverly these are dissimulated. Furthermore, the Indian police is tasked with independently enforcing this criminal legislation, and independent Indian courts are also there to see that that the Indian public is protected and that justice is done.

According to his latest scandalous pronouncements in the USA, Sachin Pilot is still attempting to remove the Independent Indian police and courts from the equation, and introduce toothless civil regulators, thus, placing foreign-based billionaire racketeers, like those behind 'Amway India Enterprises,' above the criminal law in the Indian republic.

Monday, 10 June 2013

One of our readers and blogger Shrikanth writes about Amway in his blog and it is reproduced here.

Few days back Amway India
Chairman and CEO William Pinckney was arrested along with two directors
and booked under the Prize Chits and Money Circulation Schemes
(Banning) Act., while this didn't surprise many but what followed after
is quite interesting.

India's corporate Affairs minister Sachin Pilot gave a statement that
the government is looking to remove the legal ambiguities to
differentiate between fraudulent Ponzi schemes and genuine businesses
run by "reputed and law-abiding" entities (referring to Amway).

And Kerala government ordered a probe into the circumstances that led to the arrests.

One reason why the government is so vocal in supporting Amway is because
of the investment it is making in India, the foreign money it is
bringing to desperate economy.
As a side note, India is in serious Current Account Deficit
(Expected to be around 5% for 2013) and most of it is balanced by using
the foreign investments. So, once the cheap money entering this country
stops, things will worsen more. Hence government want to keep its
image clean in the eyes of foreign investors.

As they have put in their own website, Amway invested around Rs 200
crores ($35 million) and one tenth of it is in the form of FDI (foreign
direct investment).
And they have made Rs 2300 crores ($420 million) in sales turnover in 2012 alone.

Amway, like HUL, Avon, Tupperware sells their products directly to consumers. They are members of regulatory body Indian Direct Selling Association. And Amway is the biggest direct selling company in the world.

So everything is great, what's the problem ?
why do we hear no complaints about Avon or Tupperware which also sells their products directly like Amway?
Why is it always Amway which is news for all the bad reasons ?
With so many complaints and arrests all over the world, how is this
company still sticking around and making millions year after year in
more than 100 countries ?
Are Amway Products so great that consumers are behind them , and made Amway a $10 billion company ?

There's only one simple answer all the questions : Amway is so meticulously planned SCAM that it is impossible to prove legally that it is a SCAM!!

But anyone with little bit of common sense can strip their business
model and say with no doubt that it is the mother of all intelligent
scams. So, let's do it.

Before writing this article, I have attended a session from Amway
distributors who claim themselves as intelligent IIM's and IIT's !! (The
Indian versions of MIT's and Princeton's)

Amway guys would never tell anyone they pitch that they are Amway distributors.
Why ?
The name Amway is so terribly tarnished over the last 50 years that they
can't use it upfront. No body would even listen to them, if they tell
that they are Amway guys.

The Amway guy talked for more than 30mins but never used the word AMWAY even once till he reached the end of the presentation.

While I'm not going to reproduce the entire transcript of the
presentation, will mention the major lies/sucker punches which concerns
us,

Mr IIM started by saying how he was drawing huge salary before he quit
his job to pursue his passion, interest : to start his own business,
which is now making business with most of the fortune 500 companies !!!

He gave a well rehearsed lecture about recession and how companies are
laying off employees, and we should have our own business to tackle it.

LIE No.1: When a consumer purchases a product from
retail outlet, he pays the middle men like wholesalers , retailers,
their staff salaries, real estate cost, maintenance cost etc. but our business(Amway) removes the middle men , hence customer will get the products at the wholesale price!!

As they have put in their website, Amway has more than 3 million
distributors or middle men, more than any other company. Can you compare
this with P&G which made more than $85 billion dollars in sales
last year ?

So, when a consumer buys an Amway product or a product marketed by
Amway, he pays huge middle men commission, paying insanely more than for
the better product available in the retail outlet. According to their
own statements, when a product of $100 is sold, more than $40 dollar
will be given to the IBO(Independent Business owners or distributors).
Can you see the difference ?

LIE No.2:Our products are costly because of their exceptional quality.
For example one vitamin tablet of Amway is equal to 4 vitamin tablets
of other best companies or One drop of Amway liquid washer is equal to
10 drops of P&G liquid dish washer!!

While I wont say that their products are crap, but it would be an
outright lie to say that their products are costly because of their
unmatchable quality.

They are over priced because the way Amway works. When someone buys an
Amway product from a distributor, part of the money spent will go as
commission to all those distributors in his uplink (above him in the
chain).
According to Amway, more than 40% of the product cost is pure middle men commission.

So, if this is the case if one buys from a distributor , what if you directly buy online from their website ?
In this case you are not paying any middle men commission, so you should get the products cheaper right ?
WRONG...
If you get the product cheaper directly in their online store who will buy from their distributors ?
So, distributors stop buying their products making huge loss for the products they have already bought.

so what ? who cares about distributors ? A company should concentrate on customer but not on distributors right ?
Wrong again. This is why I said earlier that Amway is an intelligent scam.

If there are no distributors Amway will shut down in months!! talk about
$10 billion dollar company creating world class products !!

You should be insanely mad, out of your mind, lunatic idiot , screwed
psychopathic, bizarrely paranoid person to buy them at their fatuously
inflated prices. Well most won't be and will simply come out of their
site.

In fact they have added few products with price tag in their website
recently, before that there was no option to see their catalogue, only
thing was we had to enter reference number of the distributor and click
on buy!

They say, they make business with most of the fortune 500 companies,
where are their products in the Amway website ? Isn't selling directly
from their website to the consumer called direct selling ?

Then how does a distributor sells these products to consumers ?
Here is the catch. Hardly any distributor sells the Amway products to a new genuine consumer.
A distributor buys products for himself and/or will sell products to another distributor under him aka new sucker.

So, unlike P&G or HUL, Amway hardly makes any money(Roughly around 5%) by selling their product to the genuine consumers.

LIE No.3: We are perfectly legal and not running a Pyramid Scheme.

This is what you'll hear from Amway CEO to bottom level IBO. And this
lie is what still keeping them in the business, as it's not possible to
prove legally that they are running a Pyramid Scheme.

They say, they are running a perfectly legal MLM (Multi Level Marketing) structure, where one can recruit to sell the products.

Hmm wait, is this really what's going on ?

When you come across an Amway guy, what does he try to convince you ?
Will he ever try to convince you to buy their awesomely high quality products ?

Ok, lets imagine a distributor is very ethical and just try to sell
products, he'll pitch people for hours and if he is really good in it,
he'll convince lets say one among 20 of them to buy his overpriced
products.
He must pitch say about 35 hours to find one buyer, and he earns 0.02% commission on it!!!

One must be out of his mind to do it right ?

Yes, this is the reason why you'll not find any Amway distributor trying
to sell products, they are just looking for more suckers under them. As
they get more IBO's under them, more they'll buy for themselves and
more suckers they'll recruit. If one doesn't find anyone under him and
keep on buying for himself, he'll keep on loosing money.

Looking at the pyramid more than 90% of the IBO's loose money, which
will be promptly shared by the people at the top. Higher you are in the
pyramid, more you'll make.

If this is not an illegal pyramid scheme, damn what the hell is a pyramid scheme then?

As they hardy have any genuine consumer, more than 90% of the people
involved in this business must loose money for Amway to make profit. If
they can't find any sucker, they can't make any money. No new money
enters the system. Thankfully for them, as P.T. Barnum once said,
“there’s a sucker born every minute”.

Amway announced record sales of $10.9 billion for the year 2012. You
must know by now, how much did its distributors lost last year.

If everyone knows this fact, then what's the problem in prosecuting them ?
Because Amway OFFICIALLY doesn't ask their IBO's to do it. Intelligent.

LIE No.4:You are required to work only 6 to 8 hours a week in your spare time, and man you will make millions in 6 months. This is just one among many deceptive statements their IBO's make. Let's see some statistics.

According to their own statistics, more than 60% of the IBO's are inactive.
What does it mean? Out of 100, 60 realise after loosing some money that
it's a crap and time to move on. If they are making lot of money why
would they ever quit?

This is what they say, when you buy the products for the first time,
you'll get them for discount (oh you have already started to earn ), you
get some people under you lets say 20, they all will get people under
them, everyone buys the products, and you make huge money!!!
whoa it's so easy.

Let's believe it for a moment, see what happens,
You'll start to hunt for people, You'll first go to your friends and
relatives and say, hey guys I have a wonderful business idea, it's
called Amway, we all can make lot of money!!
You can imagine the reaction from them the moment they hear the word Amway !!!

Lets say some wont be knowing it, and finally after making lot of phone
calls and meeting so many friends whom you wouldn't not have met for
years, lets say you'll able to convince 3 to join you.

Now how to find more ? your upline will preach you not to use the word
Amway when pitching others and go to markets, shopping malls, bus
stations, railway stations pitch everyone you get to talk to.
Is this what you really want to do in your life?

ok, lets imagine you started to do it,

9 out of 10 persons you pitch will say, not interested, lets say you pitched 50 persons.
you'll give big presentation to those 5 guys, say one gets convinced and
join you. It must have taken you at least a month to find one new guy.

Now you slog really heard and find 10 guys in 6 months !!!
Now, 60% of them loose interest and quit in few months.
you'll be left with 4 people under you. And will they be as enthusiastic and talented as you to find more people under him ?
lets say 2 of them are really good and start to find people under them.

Bottom line is you found 2 people under you after slogging for 6 months. 6 to 8 hours of spare time per week for ???
It's a joke.

And how much did you earn ? if those 4 have bought lets say $200 products each, you'll make maximum $5.

All this time if you are buying stuffs for yourself including their CD's
, books, tapes and attending their functions, then you are in bigger
shit.

Lie No.5: You are not getting more people because you don't have the skills to pitch them, you need to get educated, attend our functions, meetings, buy CD's , books, you'll see wonders in few days.

When you join Amway , your upline will force you to attend paid
functions, meetings, to buy their books, CD's or tapes of Diamonds. In
these functions/CD's Diamonds will tell about their lavish life style,
how many cars they have, how big is their mansion, how much they earn
almost doing nothing, how you can do it by not listening to negative
news about Amway and all. A complete brainwash.

While Amway doesn't make money by these tools, people at the top will.

Imagine some IBO succeeded in convincing you to join the scam under him.
And you are pretty intelligent and don't want to buy product for
yourself. Now that person who recruited you is not making any money from
you. If you leave in between without recruiting anyone, it's a waste of
effort on his part.

Hmm they are smarter than you. Here's what they'll do,

As soon as you join, they'll tell you to attend these meetings and buy
their CD's and tapes. They'll tell that these are not compulsory but are
damn necessary to succeed in Amway. They will convince you to buy these
tools , so before you leave, they'll make sure you'll loose some.

Only truth they tell is , they made billions even in recession time.
That's true. During recession, layoff's time, it is easy to find
gullible people desperate and nervous about their future. No surprises
here.

Here's one such diamond, brainwashing the audience. Observe, as
everyone in the audience is a new Amway distributor, they never ask him
any questions and listen to all the bullshit he has to say.

But ultimately, the truth is,

Only 1% of the IBO's will be able to at least recover the money they have spent.
Now you can imagine the odds of you becoming a diamond.

Do you want to involve yourselves with a business which has 99% chances
of you loosing your money and 100% chance of loosing your friends and
family ?

Finally,

IDSA, which jumped
into the scene as soon as Amway CEO got arrested and put pressure on
government to come up with policy changes to give Amway business model a
clean chit, has to answer one simple question: Doesn't it know the
pyramid scheme Amway is running and how much is it getting from Amway
which incidentally is it's biggest member?

Corporate Affairs minister who refers to Amway as "reputed and law-abiding" must be -

Ignorant of the sheer number of cases going on against Amway all over the world.

Ignorant of the fact that of all Amway distributors involved in
India, more than 50% are college students who are mind washed to spend
their time and energy in loosing their family income ?

Banning Amway distributors from buying products for themselves will not
affect India's reputation in the eyes of foreign investors. Every one
knows how reputed and law-abiding Amway is.

On a final note,
Amway constantly attacked bloggers and its critics who wrote against
it. Sidney Schwartz was one such critic, Amway filed lawsuits against
him, threatened, finally made him to shutdown his website. Here are the
links to the copy of his site - Amway: The Untold Story and Amway: The Continuing Story.

P.S : If somebody pitches you and tells you that he has a great business
Idea and it's Not Amway, it's 100% Quixtar, an online version of Amway.
Don't fall for it.

Thursday, 6 June 2013

http://en.wikipedia.org/wiki/Sachin_PilotAlthough he is only 36 years old, Sachin Pilot (b. 1977) is currently the American-educated, Indian Minister for Corporate Affairs. He has previously worked for the British Broadcasting Corporation in India, as a well as for the American-based multi-national, General Motors.

Despite his previous, apparently well-informed pronouncements, on hearing of the recent arrest of the managing director of 'Amway India Enterprises' on fraud charges, young Sachin is reported as saying:

'it is disappointing that such an eventuality came about.''the government will remove as early as possible the ambiguities in laws aimed at tackling fraudulent investment schemes.'

'We (Corporate Affairs Ministry) will work closely with concerned ministries and industries to remove the ambiguity in the law (related to tackling ponzi and other fraudulent schemes) as soon as possible.'

'While steps should be taken to crack down on fraudulent companies running dubious investment schemes, companies that are reputed and abiding by the law must be delineated,'

'Such events might negatively affect the prospects of our country as an attractive investment destination,'

'While we take strong actions against ponzi schemes, we need to be careful not to create a vitiating atmosphere for reputed and law abiding companies.' When translated into plain English, Sachin Pilot has apparently said that he has absolutely no intention of allowing the Indian police or the courts to do their job and protect the people of the republic of India from the biggest'MLM income opportunity'racketeers! On the contrary this young fellow is reported as having steadfastly pretended moral and intellectual authority whilst, at the same time, foolishly broadcasting his urgent intentionto place all the biggest 'MLM income opportunity' racketeers above the law of the land, before they can be convicted of fraud and sent to prison.Apart from the fact that young Sachin has already been approached by countless deluded 'MLM'adherents, begging him to save their 'businesses, there is another explanation for his morally, and intellectually, bankrupt commentary. Namely, the billionaire racketeers whom Sachin Pilot now apparently claims he selflessly wants to protect in the wider-economic interests of the people of the Indian republic, have been following the same subversive tactics which have enabled them to dodge criminal prosecution in the USA, and elsewhere, for decades.Thus, I have some common-sense questions which I would like to put to Mr. Sachin Pilot:

What exactly has been your own, and/or your political party's, financial connection, with the foreign-controlled, major, organized crime group known as'Amway?'

What exactly has been your own, and/or your political party's, financial connection with the foreign-controlled, parallel organization known as the'Direct Sellng Association?'

What quantifiable evidence have you seen to prove that any member of the so-called 'Direct Selling Association'has actually been regularly retailing goods, and/or services (based on value and demand) to the Indian public, rather than operating a dissimulated closed-closed market swindle, or pyramid scam, in which unlawful investment payments (based on the false expectation offuture reward) have been laundered asretail sales simply by offering a never-ending chain of temporarily-deluded victims of the swindle, effectively-unsaleable wampum?

What possible lawful reason can you supply to explain why you now, urgently don't want the above serious matters to be fully-investigated by independent Indian law enforcement agents and put before independent Indian judges by independent Indian prosecutors?

In an ideal world, it wouldn't be me putting these common-sense questions to Sachin Pilot. Self-evidently, if they have been reported accurately (and I have no reason to doubt that they have), Sachin Pilot's recent thoughtless pronouncements are further evidence that, due to the length of time it has survived and amount of capital it has already unlawfully-generated, the absurd, but nonetheless pernicious, lie entitled 'MLM income opportunity,' represents an ongoing threat to democracy and the rule of law, all around the globe.David Brear (copyright 2013)

Monday, 3 June 2013

Kozhikode: Amway India chairman and managing director Will­iam S. Pinckney and twoother dire­ctors were arrested on the basis of clear evidence, according to the crime branch (economic offences wing) superintendent Mr P.A. Valsan. “The police have enough evidence against the Amway India officials,” Mr Valsantold DC on the last day of his service in the police department. The investigation against multi-level marketing companies had been on for quite some time now, he said and added that the pace of investigation pic­­ked up after the formation of the economic offences wing in January 2010. “We have arrested several persons in connection with these cases and many of themare in jails for the past one-and-a-half years,” he said. “There were no protests then and I don’t understand the hue and cry over the arrest of a white man,” he said.On home minister Thiruvanchoor Radhakrishnan’s statement that a probe will beordered on the circumstance of the arrest of the Amway CMD, Mr Valsan said that the probe team would provide the relevant details. “The network of the money chain cases is large and widespread as 26 multi-levelmarketing companies have collected `3,000 crore from Malabar region only,” he said.

While Indian laws are inadequate to deal with direct marketing schemes and theirexorbitant pricing, the United States of America already has rules that force companies like Amway to price their products competitively. While considering the operations of Amway in the 1970s, the U.S. Federal Trade Commission had mandated that at least 70 per cent of the inventory of a distributor of Amway has to be sold through retail or wholesale. “The 70 per cent rule gives the consumer a chance to compare the prices and products of Amway with other products. If Amway’s prices are too high, the customer will naturally pick a similar product of another company,” said a Crime Branch officer who has been closely monitoring the economics of Amway and multi-level marketing companies. “They cannot sell the other 30 per cent at high prices either as customers will be aware of their rates in stores,” he said.

While the government cannot control the rates at which the company chooses to sell its products, legislations like the ‘70 per cent rule’ ensure that direct marketing companies follow competitive pricing if they are to stay in business.

“There is no rule governing multi-level marketing in India. We would also like the government to formulate new rules so that Amway has a set of guidelines that it can follow,” said counsel for Amway K.P. Satheeshan. In India, Amway sells its products through direct marketing to avoid spending on large advertising campaigns. This, however, has not translated into lower prices for the end consumer.

During a recent raid at the offices of Amway in Kochi, the Economic Offences Wing of the Crime Branch came across a list of 119 items for which the company had been charging prices four to 12 times the cost price. A calcium-magnesium tablet, the production cost of which is Rs.60.76, is sold by Amway for Rs.639 – at 10 times

the cost price. Mascara costing Rs.73.14, meanwhile, is sold at Rs.445. Mr. Satheeshan said that the company’s pricing was no different from what other companies that retailed their products did.

“If you take any product in the market, a part of it goes as commission to the retailer, wholesaler, stockist and super-stockist. Amway does not have retailers. Our distributors sell the products directly and the commission they take from the sale is their incentive to sell the items. If you check the company’s accounts, you will see that they make a maximum profit of 20 per cent only. This is not different from what other companies that retail their goods make. Ultimately, it is for the consumer to decide which product they want to buy,” he said.

The Andhra High Court, while examining a petition against Amway in 2007, had found that the company’s operations were not permissible under the Prize Chits and Money Circulation Schemes (Banning) Act 1978.

The court said it was “evident that the whole scheme is so ingeniously conceived that the inducement for aggressive enrolment of new members to earn more and more commission is inherent in the scheme.

“By holding out attractive commission on the business turned out by the downline members, the scheme provides for sufficient inducements for its members to chase new members in their hot pursuit to make quick/easy money.”

Crime Branch Superintendent of Police P.A. Valsan said, “Most of their products are priced very high. The company has the freedom to sell at whatever price they want. It is the consumer’s decision whether to buy the product or not. But people are buying Amway’s products not to use them, but for business purposes. That

cannot be done”.

The police also said that unlike the company’s claim that its products are manufactured from the produce of special farms in the United States, many items are actually produced in factories in India. Activist C.R. Neelakandan said that the government should take the chance to examine the loopholes in the law and strengthen legislations governing multi-level marketing chains in the country.

“What drives the sales of the company is not quality, but the money chain that promotes greed,” he said.

A wave of arrests, probes, allegations and denials is sweeping through the direct selling industry. On Monday, Kerala police’s economic offences wing arrested three top executives of Amway India Ent­erprises, one of the biggest direct selling firms operating in the country.

The move, six months after a former Amway dealer filed a complaint against the company, took the company by surprise. “Amway CEO William S. Pinckney and directors Sanjay Malhotra and Anshu Budhraja were in Kozhikode to seek anticipatory bail for another criminal complaint. Sleuths from Wayanad, however, took them into custody under a fresh FIR,” says Amway’s head of corporate communications, Sudeep Sengupta.

Now, it emerges that at least six probes against Amway are under way in Andhra Pradesh too. The firm is bending over backwards to refute the charges, but the stage seems set for a wider probe, with a wary public still absorbing the shock of Bengal’s Saradha scam.

“Four very serious complaints have been registered against Amway in Kerala since 2011,” says P.A. Valsan, Crime Branch superintendent of police (economic offences wing). He stresses that the firm’s modus operandi is uncannily similar to a Ponzi or pyramid scheme.

SpeakAsia, PACL, Japan Life and other fraudulent schemes have collapsed in recent years, leaving a trail of bankrupt subscribers. Over Rs 1.5 lakh crore is said to have been siphoned off so far by Ponzis. Of late, direct selling, in which distributors have the legal status of mere informal sales agents, have also come under the scanner.

The Amway men were released on bail by a Kozhikode court on Tuesday, but were asked not to leave India and to coo­perate with the probe. The complainant, Vishalakshi, has alleged she was forced by Amway to purchase Rs 3 lakh worth of products she couldn’t sell.

“Overcharging, illegal circulation of money and creating a chain of money using recruits...are typical of direct sellers like Amway,” says V.C. Sajjanar, DG, counter-intelligence, Andhra Pradesh, who earlier led many direct-selling investigations. Direct sellers and their distributors routinely violate the Prize Chits and Money Circulation (Banning) Act, he says. Promises of quick money, false assurances of huge profits and earnings based on enrolment—all are banned under this Act. But they are part and parcel of Amway’s business, claim the Kerala

investigators.

The firm is also being probed for charging exorbitant prices for ordinary products, and putting undue pressure on recruits to enrol more people.

“It will take a few months to file a chargesheet. Fraud and cheating cases may also be imposed—the court will decide,” Valsan says.

Amway’s Sengupta says they are being ‘targeted’ for being successful. “Vishalakshi did not make it big. It’s a case of sour grapes.” He could not explain why even the police would be ‘envious’. “The bigger you get, the more people bring you down,” he says. Since the only source of income in direct selling is commissions paid by those down the line to those above, the smaller players lose money while a few corner profits. This is what’s difficult to prove, and, far from making investigators envious, confounds them.

Kerala, the first state to tighten guidelines on multi-level marketing companies,has cracked the whip on Amway, which is among the first multinational direct marketing companies to enter India in the 1990s. What does the Kerala action mean for other chain-schemes such as QNET and others, which have far more dodgy antecedents?Crime Branch officials of the Kerala police arrested Amway India’s managing director and chief executive William Scott Pinckney and two directors, Anshu Budhraja and Sanjay Malhotra of the multi-level marketing (MLM) company for alleged money laundering and breach of trust. The arrests were made under the Prize Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS Act), which only goes to prove that the Act is not as toothless as various state governments have liked to claim. Moneylife and Moneylife Foundation have always said that Amway and several other multinational chain-schemes do fall foul of the PCMCS Act and there are clear high court judgements to this effect. Last month, after the collapse of Saradha group, the ministry of corporate affairs (MCA), in a face saving measure, has decided to hand over probe of such chit-fund, MLM, Ponzi and pyramid scheme operators to the Serious Fraud Investigations Office (SFIO). The ministry said the probe has been ordered in view of a larger public interest involved in the issues, although the state governments are the appropriate authorities for regulation of such chit fund companies and schemes under the Chit Fund Act, 1982. Since then dozens of schemes in Kolkata, which claimed to be chit funds have collapsed. Over 18 people have committed suicide out of despair over the loss of their life savings in Saradha alone. Interestingly, the PCMCS Act, 1978, was promulgated only after large-scale loot by these dubious companies and a report by the James Raj Committee (1974) called for a total ban on such schemes arguing that they were prejudicial to public interest. Over the past 35 years, the Prize Chits Act has been rendered ineffectual because of the refusal by state police to act quickly enough—the only exceptions to this have been exceptional police officers like VC Sajjanar from Andhra Pradesh (AP) and sporadic action in Kerala.The fact is there has been plenty of litigation on the issue, precisely because various authorities consider that the operations are illegal under the PCMCS Act of 1978. Moneylife Foundation, an NGO working towards spreading financial literacy, has repeatedly warned people about falling for MLM and pyramid companies with innumerable examples of losses incurred. Moneylife Foundation sent a representation to the prime minister, finance minister, governor of RBI and SEBI.A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as Speak Asia and Ad Magnet. In fact, the tens of thousands Ponzi/double-your-money schemes that exploit poor financial literacy cause the biggest losses to Indians across the economic spectrum today.Amway can be at best a source of pocket money Senior Amway representatives had met Moneylife to clarify their views on Amway. Richard N Holwill and Rajat Banerjee , who met us, admitted that although some distributors tend to go overboard in pitching the scheme, income from being a distributor of Amway can, at best, be a source of additional income or pocket money for most people. It is not the pathway to riches as MLM companies make it out to be. However, Amway also insisted that there is no longer any joining fee and the model does not necessarily require enrolment of distributors. However, there was no answer to expensive nutraceuticals being prescribed by doctors, whose wives or relatives were Amway agents.In India, AP was the first state to enact a law to ban money circulation schemes in 1965. Both the Supreme Court and several high courts have passed landmark judgements against the operation of these schemes as they violate the law of the land and are detrimental to the interests of the public. There are on-going cases against Speak Asia and Amway, to cite two examples.After the decision of AP High Court, a spokesperson for Amway India had said that the company had filed a special leave petition (SLP) before the Supreme Court. The HC in its ruling observed that the company's business model may come within the mischief of money circulation scheme under the PCMCS Act.

VC Sajjanar, a former superintendent of police, Economic Offenses Wing, Andhra Pradesh, who was involved in the investigation of Amway, said this (the comment of the spokesperson) was nothing but a propaganda used by the company to continue its MLM operations. “Section 3 of the PCMCS Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme. This is the provision we used to ban Japan Life, Amway and GoldQuest,” said the officer, who is now DIG at Hyderabad.

Moneylife has been writing about the menace of MLM schemes, including GoldQuest, QuestNet, Stockguru.India, Japan Life, Amway, Speak Asia, NMart, AdMatrix and so on. On the other hand Moneylife Foundation is helping people to become aware about money circulation or MLM schemes and is actively involved in making changes in the government policies through representations, memorandums etc.

Moneylife had been the first to flag Speak Asia as a fraud, way back in October 2010. In December 2010, Moneylife had reported about the dubious modus operandi of Stockguru.India and advised investors to stay away from investing in the company. It collapsed much later. Similarly, in August 2011, we informed our readers, how Surat-based NMart Retails, a division of Newlook Multitrade Pvt Ltd, is running a collective investment scheme (CIS) based on MLM model, under the guise of selling products through its retail chain. Needless to say all the three mentioned above duped lakhs of people. There are scores of other such examples.EAS Sarma, former secretary to the Government of India (GoI), has written several letters to the prime minister, ministry of corporate affairs, ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and others, on MLM menace.“Many of these (MLM) companies are not even registered under the Companies Act. Even those registered evade regulation. Those booked regroup under different names and continue to cheat the people. All these companies and those that promote them should be dealt with an iron hand and be prosecuted effectively,” he said.Kerala, said to be the country’s most literate state, is flooded with numerous “get-rich-quick” or “earn-huge-return” schemes offered by money swindlers. While the state director general of police has admitted noticing frauds amounting to over Rs1,000 crore, the worrying factor is that even a few policemen have been found to be involved in these MLM schemes.The Kerala police have also warned hotels, restaurants and convention centres across the state, not to allow money-chain companies to hold any meetings on their premises.MLMs, chain companies or networking companies—also known as chit funds or blade companies—have turned very powerful in several states, which are ruled by regional parties and have strong political connections. Their political funding protects them from any action. Also, as Mr Sarma has pointed out, “Many of these promoters have political links and they approach various ministries in the guise of marketing companies and make overtures to protect themselves. They know that they can play one ministry against the other and get away with their loot.”Independent regulators are all IAS officers who owe their jobs to being compliant or their willingness to act as hatchet persons for politicians (barring the singular exception of Vinod Rai as Comptroller & Auditor General of India, (CAG). Nobody in the system is under pressure to prevent wrongdoing; hence, no regulator, bank chairman or union minister has lost his job in the past 20 years, despite the sharp increase in the size and number of scams. If this is true of massive scams and misappropriation of funds unearthed by the CAG (2G, coalgate, irrigation, aviation, mining, defence procurement, disbursement of government subsidies, etc), where is the question of holding anyone accountable for failing to go after MLMs, Ponzis and chit funds?Remember, Saradha chit fund from West Bengal? Millions of people were connected to the chain-money or chit fund companies in West Bengal. These created the wrong kind of jobs and dubious economic growth, which is under threat with no new businesses coming up and chit funds unravelling.There are more than 50 major schemes operating in the eastern India, commonly called chit funds, but really in the 'business' of paying old deposits with the new ones, thriving on the potent cocktail of illiteracy, greed and regulatory inaction. There are a few thousand smaller schemes that are also conning people with the same modus operandi. And, they are now imploding.After the Saradha case blew up mid-April, the flow of money has completely stopped. The collapse of Saradha, with ostensible businesses in automobiles, cement, media etc., has claimed several lives.The media too will be deprived of an important source of revenue. The Bengali print and TV media and the hoardings, thrived on advertisements from Rose Valley and MPS Greenery. Rose Valley has set up its own TV channel now but continues to advertise in popular media outlets like ABP’s Ananda channel. In a last burst of that cosy relationship, the print media is now getting huge ads from the surviving several chain-money schemes which are asserting that they are different from Saradha.While the RBI has maintained that the deposit-taking companies does not fall under its jurisdiction, market regulator SEBI tried to rein in such companies in the past under its collective investment schemes (CIS) regulations. However, these companies managed to subvert the SEBI orders and continued to flourish with political patronage.Another interesting aspect of all deposit-taking companies is the source of money. Nobody knew exactly where the money was coming from for these companies, but everybody suspected that it was some kind of a pyramid marketing scheme, made infamous 30 years ago by the failed Sanchaita Investments. Sanchaita Investments went bust in 1980s leaving behind a long trail of ruin and suicides by number of agents and depositors in West Bengal.So far, all deposit-taking companies, chit funds and CIS operators have received patronage from politicians across the party lines. Especially in West Bengal, the ruler got changed but patronage has remained the same. The CID and state finance department officials had once raided Rose Valley’s office in Tripura, but to everyone's surprise, no arrests were made. Many people had attributed the outcome to Rose Valley's cosy relations with the Left Front.The Saradha group is reportedly known to be close to Trinamool Congress leaders and the government.According to Robert FitzPatrick, President of US-based Pyramid Scheme Alert, schemes like Amway, QNet or GoldQuest are an “endless chain”, or a “pyramid scheme”.“I believe this form of fraud is a clear danger to national economies. They subvert efforts to accumulate wealth. They divert energy and funds from real businesses. They often divert people from seeking more education with their promises of fast wealth. They destroy savings and equity of lower income people. They confuse people as to what a legitimate value-based business is. Unless the regulators and analysts recognize and are willing to assert that this form of business is ‘inherently’ fraudulent and harmful, it is rather difficult to stop any one particular company. Such a fraud, whether the products are soaps, gold coins, vitamins or air in a box, will always cause 90%-99% of the investors to ‘fail’. Whether some of the people engage in retail selling or not, the income promise that relies on continued expansion is deceptive, that is, it is a lie. The financial harm to the vast majority is predetermined. Calling it a business does not make it so. A real business requires an exchange of value,” wrote Mr FitzPatrick to us. He is actively exposing several pyramid, Ponzi and MLMs.Here are some of the important stories written and representations made by Moneylife over the years…Moneylife Foundation’s representation to PM, FM and RBI on MLM schemes In May 2011, following the exposé by Moneylife on Speak Asia Online Pte Ltd and its MLM scheme, Moneylife Foundation sent a representation to prime minister Dr Manmohan Singh, (the then) finance minister Pranab Mukherjee, finance secretary Sushama Nath and Reserve Bank of India (RBI) governor D Subbarao urging them to ban all MLM companies and their schemes in the country, or to bring all MLM companies under the regulation of either the RBI or the Securities and Exchange Board of India (SEBI), to stop them ensnaring gullible people.West Bengal’s ‘chit fund’ mess and inaction of MCA The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.Chain GameDubious pyramid schemes or money-circulation schemes are looting Indians across economic strata, finds Sucheta Dalal. This will continue since Central and state governments seem unconcerned.Pyramid schemes: Daylight robberyPyramid marketing companies are looting the public easily, while the government watches. Many countries have banned them outright.Ponzi Scheme: Is RBI Passing the Buck?A strange deposit scheme that is proliferating in the states of Orissa, Chhattisgarh, Karnataka and Maharashtra has already collected almost Rs1,000 crore and is expanding virtually unchecked. The scam has elements of money-laundering and possibly the use of fake and forged currency as well; however, the banking regulator would like to pass off the investigation to the respective state governments for investigation under the antiquated Prize Chits and Money Circulation Schemes (Banning) Act.Coin GameAn international network marketing scheme hawking expensive limited edition coins is attracting a huge following. Sucheta Dalal examines this strange quest.Ponzi schemes: Free for allMoneylife readers know how MLM schemes ensnare lakhs of people by promising extraordinary returns. We learn from the ministry of consumer affairs that the government is now waking up to the need for better regulation of MLMs and Ponzis. At the same time, the powerful Direct Selling Association of the US is lobbying hard for an amendment. ‘Beware of deception by pyramid schemes, MLMs trying to lure people with promise of high returns’Pyramids are pure fraud. Their business is unsustainable-they promise payment for goods or services of dubious value. The hallmark of these schemes is the promise of sky-high returns in a short period of time, for doing nothing other than simply handing over your money to them, and getting others to do the same.Ponzi schemes: The fraudulent art of chain gameEven as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable.Dubious Ponzi & MLM SchemesInvestors losing money, or falling for dubious Ponzi schemes, is not a recent phenomenon; this has been happening for decades and it is not restricted only to India. Why is it that people repeatedly fall prey to such schemes in spite of being aware of the frauds perpetrated by conmen under different guises?

Set up inter-departmental group to curb MLMsEAS Sarma, former power and finance secretary, said the ministry of finance, RBI, SEBI, and the investigating agencies should collectively tackle this problem without any delay, as every day of procrastination will only result in thousands of hapless families cheated by the promoters of these schemes.How MLMs wave an annulled letter to claim legitimacy of their operations and con peopleSpokespersons and dealers of MLM schemes or network marketing schemes respond to questions about their legitimacy by brandishing a 2003 letter issued by the then secretary, ministry of corporate affairs (MCA). What they omit to mention is that the letter was subsequently annulled following complaints about its misuse. This means, the letter used by these scamsters is no more valid.Pyramid and MLM schemes are scourge on peopleWhile there are existing laws such as Indian Penal Code (IPC), the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS Act) and others under which concerned agencies could prosecute the culprits, there is no effective mechanism in place to ensure a coordinated approach to identify the fraudulent operators in advance and book them well before they destroy the livelihoods of thousands of households and launder the ill-gotten funds to unknown destinations.MLMs now want to ‘invest’ money in India, really?A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as SpeakAsia and Ad Magnet.QNet, the MLM company, has no answers to Moneylife’s simple questionsQNet, the controversial Hong Kong-based multi-level marketing (MLM) operator with multiple names (GoldQuest, QuestNet, QNet, QI Ltd and QI group are the better known names) refused to answer simple questions like how much money their independent representative (IR) earns on an average every month and why their products are priced so highly. Instead, it sent us a threatening and defamatory mail that raises more questions as to their real motive.2011: A year dedicated to MLM and Ponzi scheme fraudsIf 2010 was the year of great Indian scams, 2011 was rather of Ponzi and MLM frauds. SpeakAsia managed to top the chart, but soon many others joined the bandwagon, duping gullible investors for several thousand crores.How to avoid 'get-rich-quick' schemes and scamsNothing comes free in this world, especially money. The universal truth is you need to earn your money by hard labour all the time and there are no shortcuts to double it in the shortest span of time. Therefore, even if your near and dear ones tell you he/she will double, triple, quadruple your money within a few days/months, politely reply to them that it is not possible and what they are advocating is a pure “get-rich-quick” type of scam.Herbalife is a pyramid scheme worth zero dollars: Bill AckmanHerbalife, a global MLM scheme also prevalent in India, is believed to be worthless according to hedge fund manager Bill Ackman, who made a detailed presentation on why consumers should avoid buying the company’s products and stay away from the MLM.